Honda Atlas 231y2z

Where? Regions Company has two main manufacturing plants. One of the two is located in Karachi and the second, a more recent development, in Sarghoda. We have four regional offices located in Karachi, Lahore Multan & Pindi. For our own convenience, Company has demarcated the country into five main regions. 1.

South

3. Multan

2. Lahore

4. Faislabad 5.

Rawalpindi

We have a total of 6,000 service dealers spread out throughout the country, 253 sales dealers and 178 5s dealers strategically located throughout the country.

What needs? Products & Technology Currently we are involved in the manufacture of four different variants of motorbikes. These are the: 1.

CD 70

2. CD 100 3. CG 125 4. CG 125 Deluxe

All four variants are manufactured with the four stroke technology. The two stroke technology is currently being used by other local manufacturers, namely Yamaha. However, for purely strategic reasons, Company had decided not to go into production of such a product line. A robust 92% of the CD series has been depleted, and is sourced from local suppliers and manufacturers. The CG series has been depleted to 85%.

Company was approached by the government recently and asked if we would be willing to make a compatible rickshaw using our current technology with regard to the Rozgar Scheme launched by the government. Company refused since we were not interested in producing a product variant that far from the current product portfolio.

Whose needs? Markets Most of the chunk of our production is used to satiate the local demand. Most of the local demand originates from the lower middle and lower income segments of the consumer base. These consumers are looking for a reliable and cheap mode of transportation. One whose maintenance cost does not burden our low monthly incomes. Company does not export to other countries on a regular basis. However, previously we have exported to countries like Bangladesh, Afghanistan, Nepal and Sri Lanka. But this was only seldom. Due to the recent increase in our installed productive capacity with a new manufacturing plant in Sarghoda, we have more than enough productive capacity to fulfill local demand. Hence, now we are looking into more long term exporting market prospects. However, before we go ahead with such a plan, we will have to receive a letter of acceptability from Honda Japan before entering any foreign market. We cannot do so without the parent companies consent.

Value Addition Company enjoys a technological advantage coupled with an infrastructural advantage over most of it competitors. We have a robust dealer networks throughout the country. Most of these dealers not only provide the service of sales, but also of servicing and help maintaining the product. Investing highly in technology we have the state of the art production units in the country. Even with a 92%

depletion rate, we have managed, by treating our suppliers as our partners, to maintain the same Japanese quality that we promise to deliver.

Future possibilities Company Pakistan is looking into maintaining a substantially higher installed capacity as compared to the of the market size. The reason for this is that we are looking into long term exporting market. We had not given this segment attention because earlier we had only enough capacity to meet our own needs. However, this is not the case now.

We do not deal in We do not deal in the two stroke technology even though it is used by Yamaha, who used to be considered our main competitor at one time. We do not and will not engage themselves in producing a product based on this technology.

INDUSTRY LIFE CYCLE STAGES The Industry Life Cycle

Maturity

X

Decline Growth

Introduction

Analysis: The motorbike can still be considered to in the growth phase. Statistics show that currently the ratio of people to bike is 1:10. That is for every ten people in the country there is on motorbike. Countries in similar economic conditions as ours have attained a ratio of 1:4. Hence compared to other countries in similar economic stages as us, there is still a large room for the industry to grow. It was only as recent 2002 – 2003 where the market size jumped by a substantial 100%. There is still more of that growth yet to be experienced.

Political Forces: The unstable law and order situation in the country has affected the industry in ways of making the consumer even more price sensitive than we were before. The product itself can be easily snatched or stolen making the product vulnerable to these actions. Consumers will continue to be price sensitive till this factors is addressed by the government. Te recent development of banning rentals of motorcycles has a potential in it to shut down an entire segment of demand of the product. The size of this segment city or area wise is questionable however; the aggregate size would be definitely substantial.

Economic Forces: At present there are 43 motorcycle assemblers in the country that have been licensed by the Engineering Development Board (EDB). Out of these, there are three Japanese assemblers (Company, Yamaha and Suzuki), while the remaining 40 assemble Chinese motorcycles. These assemblers buy parts, sub-assemblies and assemblies from over 200 large, medium and small vendors located in Karachi and Lahore. The motorcycle industry employs more than 200,000 people directly and indirectly. We added that direct jobs in the motorcycle industry would grow to 300,000 by the year 2010 while indirect jobs would touch to 2.7 million. The average GDP of Pakistan is increasing for the last three years, if this trend continues the sales of the motorcycle industry are expected to grow.

Social Forces: New government laws regarding environment are a great threat for some of the major players of the market in the near future. The government has imposed a ban on motorcycles, which are of 2 strokes and/or 70 CC or less than 100 CC, to travel on highways, due to environmental pollution concerns. If the ban is stretched to rural and urban areas as well, it would create negative impact on sales of motorcycles of these categories to those segments which use motorbikes as a mode for traveling for a long distance.

As far as bikes are concerned ownership of the product is restricted to male of the family hence hindering the potential size of the consumer base. Moreover, this ode of transportation is looked down upon by the higher income segments of the society. The product is being treated as a commodity both by many of the manufacturers and by all of the consumers. It is because of this fact that we do not expect any major kind of differentiation between any of the manufacturers’ example shape, color, etc. Yamaha and other Chinese manufacturers are trying to break the norm but are unsuccessful in doing so. We suspect that the main reason of our failure is because of our lack sheer size to influence the market.

Technological Forces: As it has been witnessed in the recent few years it is technologically possible and cheap to set up small manufacturing units. The basic set up technology is available locally whereas more complex and technologically advance versions would have to be sourced from abroad. It is not easy to change the manufacturing technology to 2 stroke to that of 4 stroke or vice versa. The quality of technology used in the manufacturing process should be reflected in not only the fuel efficiency but overall performance of the product. In order not to burden the after sales service provider networks.

Bargaining Power of Customers

l--------------------------------XX----l-------------------------------------l Low

Medium

High

• There are a larger number of manufacturers present in the industry. Due to recent economic developments there has been a rise in briefcase industries that have relatively smaller productive capacities (average 20,000 units/annum). • The target audience for the product in question is extremely wide. There are a large number of buyers who usually purchase in small quantities.

• However, given the demographic characteristics of the target segments of the industry, we are extremely sensitive to price. Hence, the price plays an important role in the success of a product in this industry. • Apart from just the price, the target audience also looks at features such as after sales service and value.

Analysis: After careful analysis, we have come to the conclusion that the buyer power is low. There are many factors that this conclusion. The first factor is that since the entrance of new players (Chinese manufacturers) the market base has grown substantially hence reducing the power of each individual buyer. It seems to appear that there is an element of branding that exists in the industry amongst the consumers, giving more evidence that the buyer power is low.

Bargaining Power of Suppliers

l--------------------------------XX----l-------------------------------------l Low

Medium

High

• In general, the components needed to manufacture a motor bike is pretty much standard. • From a manufacturer’s point of view, it would be considered difficult for his suppliers to come into the same line of business as him. It is considered to be an entirely separate industry.

• Due to the deletion policy of the government, manufacturers are compelled to divert to local manufacturers. However, there exists an abundance of suppliers of these components hence making our power relatively low.

Analysis: Looking at suppliers of each component to the manufacturer in isolation, the contribution of each component to the final product, relative to the cost, is very low. The nature of supplier products is that of a commodity. This fact makes the supplier power low. However, for those manufacturers who are involved with a global company of d with them in any way, the suppliers of our main components, the mother company, usually over powers them.

Rivalry of Existing Firms

l-------------------------------------l--XX----------------------------------l Low

Medium

High

• In the year 2000 the market size was 110,000 units. It is estimated that by the end of 2006 the market would be recorded at 700,000 units. The market would have grown by the end of 6 years by 536%. This increased market has and will increase rivalry among the firms for market share.

• The product in question in relation to the present circumstances is considered to be commodity product to some extent. A commodity product market usually has high rivalry amongst the firms present in the industry.

Analysis: The industry is growing due to increased growth in the disposable income of the consumer (increased GDP) coupled by the fact that the manufacturers reduce our prices. This has increased the customer base and has hence given rise to demand for motorcycles leading to increased competition.

Threat of Substitutes

l----------------XX-------------------l--------------------------------------l Low

Medium

High

• As always there are two aspects to look at this issue. Either we consider the substitute to the nature of product, i.e. the motorbike itself, or the substitute to the brand of product, i.e. either Yamaha or Company. However, we shall look at the former. • All alternative transportation can be considered as substitutes to the motorcycle. However, since Pakistan does not have a well established infrastructure of transportation, either bus or train network, threat of substitute is relatively low. • It is unlikely that owners of motorcycles would switch to alternative modes of transportation unless given specific circumstances.

Analysis: Unfortunately our country does not have a developed network of public mode of transportation. However, unfortunate this may be to the citizens of Pakistan, this fact positively affects the motorcycle industry as our consumers have limited options for reliable and timely mode of transportations.

Threat of New Entrants

l----------------------------------------XX--------------------------------------l Low

Medium

High

• Many players exist in the industry with a handful of large firms. These large players do have a cost and/or performance advantage over the small players. The major chunk of small players usually consists of Chinese motorcycle manufacturers who tantamount to a little over 40. • In order to establish a long term position within the industry two things are considered to be most important. First the after sales service, which is offered by only large firms. Secondly, an efficient distribution network which ensures the proper supply of motorcycles to the end consumers. It is very difficult for the small players as well as for the new players entering, to duplicate the large firms’ distribution networks and after sales service. This gives the lager manufacturers a competitive edge over new entrants.

Analysis: Entry Barriers are high and favorable to the industry, even though the top three Japanese companies control almost 71% of motorcycle industry. It would be difficult for some these companies to die off quickly. However, challengers can be seen approaching the horizon. Local manufacturers like Pak Hero have begun to follow the same foot steps as our Japanese peers had done many years ago when we entered into the industry and began to spread the roots of the dealership networks city by city, province by province.